Future trends for investing in property: Ownership and limited companies

In the final video of this series, we look at current trends for both landlords and tenants. We discuss the traditional five key areas in Edinburgh for landlords and also look at the new up and coming areas. We look at changes in the lending criteria from banks and also discuss how changes in tax legislation are affecting landlords.

Full text transcript below:-

David Court: You know what it’s like in the office of somebody’s come in and say, “What are the trends? What are we looking for? What do we need to be concerned about?” And these things. How do you deal with that?

Rob Trotter: From two angles, I suppose. What trends in terms of buyers looking to buy investment properties and trends in terms of those tenants looking to rent them. Trends with tenants, they’re definitely getting more demanding. They expect more. Location wise, they are still looking for big city centre locations in the main. A major trend which has been ongoing for a long period of time is, city centre generally speaking, is furnished flats.
Move out, move into more outlying areas and we’re seeing increasing numbers of properties which will rent unfurnished to much longer term tenants. That’s a trend, definitely. Certainly, there’s a major trend at the moment. There’s a shortage of good rental stock, but there’s a shortage of good investment stock, as well. Historically, if somebody had walked through our front door and said, “I have x thousands of pounds,” and they wish to buy a rental property to rent out, you would almost be guaranteed that would have been converted into business very quickly.
Now, the frustration is that we have numerous people approaching us with money to spend, but the main hurdle is they can’t find the property that suits them or they keep getting beaten to it by somebody else who’s trying to buy that property. The five key areas that we’ve seen, certainly if we’re talking about Edinburgh, those areas are it’s very difficult to get properties in them now. They are the prime locations. People are now tending to look in other locations and spot where might be the up and coming areas within cities, to see if they can’t pick up a property a bit easier but still capitalise on growth over the long term.

David Court: I’ll scribble this down. Do you want to give me some places that we should be looking at for these things?

Rob Trotter: In Edinburgh, I would say the five key places in Edinburgh were always Stockbridge, New Town, Marchmont, Morningside, Bruntsfield for flatted accommodation. They’ve got a good proportion of one and two-bedroom flats, well served with local amenities. Period properties. They’ve got character. They’ve got charm. They’ve got green space. That’s where people want to live. That’s what people want to buy. Increasingly expensive, increasingly hard to get them.
People are now starting to move into the outlying areas. Top end of the Leith Walk with the investment that’s planned for there, I think all of that area will start to improve. Certainly Hillside. We’ve already seen some fairly large gains there. West end, Haymarket Station is being transformed. There’s development all planned in that area. All of this I think, will attract investors into that area and these areas.

David Court: You see a lot of student accommodation now, which is a purpose built from that. How do you find that affects the market, in that sense?

Rob Trotter: It’s making the student market more competitive. I think owners of hmo properties and the likes in Marchmont, your big three, four-bedroom properties, need to be more competitive. They need to make sure that those flats are well presented, well-appointed to detract tenants away from the more purpose built properties.
Another trend now we’re seeing a lot of, which is shortening or reducing the level of stock is, the arrival of large numbers of short-term holiday operators who are snapping up properties to rent them on various different websites on a short-term holiday basis. There is no question that is removing stock from being long-term housing, whether it be owner-occupiers or rentals. That is a trend which is adding an upward pressure on housing stock.

David Court: Murdo, what trends are you seeing?

Murdo McHardy: I think the biggest trend we’ve seen over the last number of years in the mortgage or the lending market is the lack of flexibility amongst lenders. If you go back years ago, when mum and dad and their children knew the bank manager and the bank manager could come up with flexible solutions as to how we lend you money or what your requirements are, those days have completely gone.
More and more what we’re seeing is that for people who want to borrow money, whether it’s for residential property or for buy to lets, if they don’t tick specific boxes with a lender, the lender isn’t happy to offer them the mortgage. I think the market is really crying out for some more flexibility where lenders can take a view on these things, and look at the overall picture. Somebody’s wealth. Other income, not necessarily just from the property itself. Other assets.
Look at the whole picture. That’s disappeared from the market over the last number of years. That’s what I think is a big demand that we’re seeing, that if that comes back to the market it’ll help a lot of people out that maybe can’t get mortgages or don’t tick the right boxes with some lenders just now. Intergenerational lending for example, where there’s parents and children involved, whether that’s through guarantors, limited companies, more than two people on the mortgage.
All these things are slightly more complex scenarios that traditional banks and high street lenders haven’t been able to deal with well. I think there are solutions required for those in the market. They are the biggest trends, I think, that we are seeing. Just that more flexibility is needed as people’s lives and situations become a bit more complex.

David Court: From the tax efficiency point of view and the customer’s requirements? Do you find that’s what’s happened?

David Miller: I think certainly more of our clients are aware they need to look at the ownership of the properties, whether they should be in joint means with their spouse or civil partner. That’s becoming more popular. People are realising that the tax situation has changed. You need to be a bit fleet of foot to obtain the best tax result for themselves. We are certainly seeing more clients talking about buying properties through limited companies.
That’s certainly a trend. I would certainly agree with Murdo about the lending requirements. So many of our clients are quite frustrated about trying to re-mortgage a property every two years. It is quite a torturous procedure to go through. I think more and more landlords will be looking for a lender to offer them a solution, which will not require them to re-mortgage every two or three years.

David Court: I think that’s quite promising in the way that the phrase bespoke lending is actually what I think the future will hold, because gone are the days that people will be looking to re-mortgage on a regular business. I think that’s quite important to give confidence to the market, and might end up helping it.